The Republican proposal to replace the federal Affordable Care Act is bad news for millions of people covered by both public and private insurance plans — especially those who are older and sicker — and states would be left to foot the bill for a growing percentage of their care, according to a panel of experts who gathered Thursday.
The group, convened by health policy leaders at Rutgers University, was scheduled to discuss the impact of repealing and replacing the landmark ACA long before Republican Congress members introduced their healthcare plan on Monday. That plan, which was approved by two Congressional committees Tuesday following some 27 hours of debate, sparked sharp criticism from all the panelists, who agreed it represented a “fundamental change” in the way the federal government provided healthcare coverage. (To see how the GOP’s new healthcare plan could affect New Jersey, follow this link.)
“What’s really happening in this proposal,” explained Heather Howard, a Princeton University affiliate and former Commissioner of the state Department of Health, “is a dramatic transformation of the entitlement nature of the Medicaid program. What that means is you’re shifting risk to the states.”
Michael Gusmano, an associate professor at the Rutgers University School of Public Health, said that while the ACA had moved the United States toward the “international standard” of health insurance as a social principle, the GOP’s plan — dubbed the American Health Care Act — sends the country in a different direction. “It’s a fundamental philosophical shift in the role of government,” he said. “I think you’re going to see a fairly significant loss of coverage, both public and private.”
ACA’s controversial insurance mandate would go
The HCA would repeal the controversial insurance mandate in Obamacare (ACA), but maintains some of the popular elements of the law, like requiring insurance companies to cover patients with pre-existing conditions and allowing young adults to remain on their parents’ plans until age 26. But it shifts the way the federal government funds Medicaid, leaving states to cover more of the costs, and creates a more stringent enrollment process. A $100 billion fund to be shared by states to offset some of these losses is unlikely to make up the difference, experts said.
The GOP proposal also replaces the subsidies offered under the ACA with a system of tax credits for those who don’t get insurance through their job or a government program and earn less than $75,000 a year, or $150,000 as a couple. But these funds, which total $2,000 to $4,000 a year per person, would leave most patients responsible for much more of the premium costs. And changes to the insurance regulations would allow plans to charge older, sicker individuals up to five times as much as they charge younger people.
“It’s a prescription for deeply downshifting coverage for older, sicker people,” explained Sara Rosenbaum, a health policy professor at George Washington University, who worked for a half dozen presidents and some 15 Congressional offices. “The provisions were not designed to promote access to health insurance.”
But the bill is sure to evolve even more as it faces a vote in the Congressional budget committee, and eventually the full U.S. House of Representatives, in the coming weeks. Not only are Democrats highly critical of the changes, which they said will eliminate many of the gains made under the ACA, but a number of conservative Republicans have also complained it does not go far enough in eliminating entitlements; opposition is also building among GOP senators.
The bill has also prompted concerns among a growing number of powerful stakeholders, including multiple hospital groups, physician organizations, nurses and other healthcare providers, and the AARP, which is concerned about the higher costs predicted for people over age 50 and potential cuts that could harm seniors with disabilities, who are covered by Medicaid. (Seniors without disabilities are insured by Medicare, regardless of their income.)
Christie wants to wait and see
While New Jersey Democrats have pressed Gov. Chris Christie, a Republican who remains close to President Donald Trump, to use his relationship with the President to scuttle or change the plan, the governor said Wednesday he is taking a wait-and-see approach. “This is just the beginning of the negotiations,” he said.
“It takes a coalition to pass a bill, of course,” said panel moderator Joel Cantor, director of the Rutgers Center for State Health Policy, which sponsored Thursday’s event along with the Rutgers University Institute for Health, Health Care Policy and Aging Research, and the Robert Wood Johnson Foundation. (Cantor is a regular contributor to NJ Spotlight.)
But Rosenbaum, who was in touch with colleagues in Washington, D.C., during the event, warned that amendments under discussion could result in even more draconian changes. Among the measures under discussion is a provision that would add work requirements for “able bodied” or non-disabled adults on Medicaid, she said, noting, “it’s like language from Dickens.”
Howard, who also worked in Congress and heads several ACA programs for the Robert Wood Johnson Foundation, said whatever the final product, the bill is likely to spark “food fights between the states,” as they jostle to position themselves for more federal funding. The bill would eliminate the current Medicaid formula, in which the federal government pays for 50 percent to 90 percent of each patient’s care, to one in which states receive a set annual amount per enrollee. As a result, states with more patients would lock in more federal money, while those that provide generous benefits may have to stretch these D.C. dollars further.
In New Jersey, the Medicaid, or FamilyCare, program covers 1.8 million people — nearly one in five state residents — including some 550,000 who were added to the rolls after the ACA expanded eligibility to the public insurance program. The law also benefitted some 300,000 patients who were able to buy policies shaped by the ACA on the individual or small business insurance market; one-third of these people received federal subsidies that paid for most of the monthly premium.
Battles among the states are likely
Howard said that, in addition to battles among states for the biggest share of federal pie, the HCA is also likely to prompt “food fights in state capitals over a shrinking pool,” as leaders are forced to choose which patients and what benefits should be funding priorities. While the shift to per-capita grants is framed as an effort to increase state flexibility, Howard said it is really driven by a quest for stable federal budgeting, and actually makes it more difficult for states to react to changes in demographics or population health.
“The program can’t be nimble if there’s an economic downturn or a health crisis,” Howard said.
“If there’s less money, I don’t know how real the flexibility is.”
Even the $100 billion fund, to be distributed among the 50 states for use as they see fit, won’t help that much, Howard said. “State’s love slush funds,” she said. “But governors have so much at stake and are on the ground having to deal with these realities.”
Last month, Christie said he would not oppose a system of block grants to replace the current system used to fund Medicaid. On Wednesday, he added that he was pleased any change is put off until 2020 in the current bill. “I’m heartened by the idea that they wouldn’t change anything for four years, which I think is good and would give folks a chance to begin to adjust to whatever it would be afterwards,” the governor said.
Market into meltdown?
Mark Pauly, a professor of healthcare management at the University of Pennsylvania, said the proposal could also send the individual and small business insurance market into a meltdown. He said the structure of the tax credits, when combined with regulatory changes that permit higher premium charges for elderly, unhealthy patients, and other factors, aren’t likely to drive more people into the insurance market — a critical factor in spreading the cost risk and holding down costs.
To help drive healthy patients to purchase coverage before they get sick — another key part of spreading risk — the proposal would allow insurance companies to charge them 30 percent more if they had dropped coverage in the previous year. But Pauly said this isn’t enough of a stick to convince healthy people to purchase coverage, warning that the system would still be plagued by “Evel Knievels” who choose to go without, despite the risk.
“It’s troublesome, even for a market-oriented person,” Pauly said. “Now I’m really scared about a death spiral” in the individual and small business insurance market, he added.
Gusmano also raised concerns about suggestions in the bill that states could return to an era of low-cost, bare-bones, major-medical coverage — products that were outlawed in the ACA. “It feels a little bit like “Back to the Future;” in the eighties, everybody was trying to sell basic benefits plans,” he said.
Panelists agreed that some states would do more to step up and fill in the funding or regulatory gaps in an effort to protect patient coverage. States like New Jersey, with a strong regulatory foundation and a robust, professional Department of Banking and Insurance, will do better than
those with an elected insurance commissioner and few regulatory staff, Cantor stressed.
“Even if they do want to be in the game, they have to have the capacity,” Howard noted. “And nobody runs for governor on the platform of increasing the insurance department workforce.”
(New Jersey voters are scheduled to elect a new governor in November.)